Countrywide bias deal affects 15,000 in Illinois

 

$335 million settlement follows claims that mortgage lender charged higher rates, fees to African-Americans, Latinos from 2004-2008

As top Justice Department officials announced a historic, $335 million fair-lending settlement on Wednesday, Illinois Attorney General Lisa Madigan said about 15,000 African-American and Latino borrowers in Illinois who took out real estate loans from troubled mortgage giant Countrywide are entitled to compensation.

Madigan was in the nation's capital as top Justice officials announced the proposed pact arising from Countrywide loans to members of the two minority groups from 2004 to 2008. U.S. Attorney General Eric Holder called it the Justice Department's largest residential fair-lending settlement.

Nationwide, about 200,000 qualified minority borrowers suffered discrimination, he said. According to the Justice Department, Countrywide charged higher interest rates and fees to African-American and Latino homebuyers than to white applicants with similar income levels and credit scores.
The now-defunct Countrywide was the largest mortgage lender in Illinois from 2004 to 2007, according to Madigan, who condemned the firm as "synonymous with subprime lending."

The far-reaching agreement was hammered out in the aftermath of a lawsuit filed by Madigan against Countywide and its subsidiaries in 2010. It was reached between Bank of America, which bought Countrywide's assets in 2008, and the federal government. It still needs a judge's approval.

Two types of discriminatory practices against credit-worthy minority borrowers were alleged by the Justice Department, which conducted a coast-to-coast investigation.
Either the borrowers were charged higher fees associated with obtaining a mortgage or they were steered into costlier, riskier subprime mortgages when they would have qualified for lower-cost, prime mortgages, Madigan said.
In the first case, Illinois borrowers could be eligible for a settlement ranging from several hundred dollars to more than $1,000, she said. In the second, borrowers qualifying for a settlement could receive about $10,000, she said.
Madigan said some Illinois borrowers lost their properties to foreclosure, but she could not specify a number.
The Illinois attorney general had mixed emotions Wednesday, noting the lingering economic effects of the collapse of the housing market in recent years.
"I'm glad there will be some economic relief for the borrowers who suffered, (but) there's still an enormous amount of work that needs to be done to rebuild communities and our economy," Madigan said.
According to the Justice Department's formal complaint, victims of Countrywide's discrimination lived in 41 states and the nation's capital.

In June 2010, Madigan sued Countrywide Financial Corp., Countrywide Home Loans Inc. and Full Spectrum Lending Inc., an arm of Countrywide that she said sold mostly subprime loans. Her office's analysis found that disparities in lending to minorities could not be explained by factors like borrowers' credit scores or debt-to-income ratios.

The Illinois lawsuit followed years of investigation into Countrywide's lending practices.
Madigan issued a subpoena to Countrywide in March 2008. That followed a 2007 study by the Chicago Reporter of federally collected mortgage-lending data for the Chicago area. The study found that in 2006, Countrywide Financial Corp. sold higher-cost loans to 50.9 percent of its African-American borrowers and 33.8 percent of its Latino borrowers, while 19.5 percent of the company's white borrowers received high-cost loans.
The settlement agreement was filed in U.S. District Court for the Central District of California. It calls for no punitive damages, Madigan said. In the agreement, the defendants deny claims of discrimination.
Dan Frahm, a Bank of America spokesman, said in a statement: "We reached this settlement to resolve issues about Countrywide's alleged historic practices that occurred before Bank of America acquired the company. Bank of America's practices are not at issue.
"We are committed to fair and equal treatment of all our customers, and will continue to focus on doing what's right for our customers, clients and communities. We discontinued Countrywide products and practices that were not in keeping with our commitment and will continue to resolve and put behind us the remaining Countrywide issues."

The settlement calls for an administrator to contact borrowers identified by the Justice Department as victims and to distribute compensation to them. Officials said people who believe they were victims of Countrywide's alleged lending discrimination and have questions should email: countrywide.settlement@usdoj.gov.